Goldman Sachs Top Adviser as Canadian M&A Soars on Oil

Goldman Sachs Group Inc. was the top investment banking adviser on Canadian mergers and acquisitions in 2014, as oil and gas and cross-border deals drove takeovers to a seven-year high.

Canadian firms were involved in $229 billion worth of transactions through Dec. 29, the highest annual tally since 2007 and up 45 percent from last year, according to data compiled by Bloomberg.

Goldman advised on $61.6 billion worth of those deals, its highest ever in Canada, and narrowly edging out JPMorgan Chase & Co, which advised on transactions valued at $61.3 billion. Royal Bank of Canada slipped to third spot after three consecutive years at No. 1, while Barclays Plc and Citigroup Inc. rounded out the top five. The figures and rankings are based on announced date and subject to change as more deals are recorded.

“A significant portion of Canadian M&A this year has been cross-border driven, which plays to our strengths of having an integrated, long-tenured Canadian team and a global footprint,” Peter Enns, Goldman Sachs’s Canada chief executive, said in an e-mail.

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About 77 percent of the transactions were cross-border deals, including the year’s two biggest: Burger King Worldwide Inc.’s $13.2 billion takeover, including debt, of Tim Hortons Inc. and Repsol SA’s $13 billion purchase, including debt, of Talisman Energy Inc. Citigroup and RBC advised Oakville, Ontario-based Tim Hortons, and Goldman and Nomura Holdings Inc. advised Calgary-based Talisman on the deals.

“That large sort of transaction is where we and our bulge-bracket peers try to fish the most,” said Grant Kernaghan, Citigroup managing director of Canadian investment banking.

Oil Patch

Goldman’s win in Canada echoed its broader gains globally where it finished first for a fifth consecutive year, advising on more than $926 billion of the $3.3 trillion deals around the world in 2014, which reached the highest since 2007.

Goldman also dominated in Canadian oil and gas, advising on 50 percent of the $51.4 billion worth of deals in the industry and leading for the first time since 2005 in the sector. JP Morgan, which advised Repsol on its Talisman purchase, was No. 2 in Canada’s oil patch, advising on $18.3 billion worth of deals.

That was a reversal for both Goldman and JP Morgan which were involved in just $122 million and $595 million worth of oil and gas transactions in 2013 respectively.

On Offense

“As they say, it’s overnight success five years in the making,” David Rawlings, chief executive officer at JPMorgan in Canada, said in an interview. The U.S. bank has invested heavily in Canadian investment banking in recent years, particularly in financial institutions and energy, he said.

Despite the plunge in crude prices and continued weakness in the mining sector, the Canadian M&A market is expected to remain strong in 2015, aided by low interest rates and healthy equity markets, Rawlings said.

Several years after the financial crisis there’s a new group of CEOs who are no longer focused on just playing defense and are looking for growth, he said.

“The environment that we enter in 2015 is somewhat similar to the environment we entered into in 2014,” he said.

North American crude’s 44 percent drop this year may put a temporary chill on the energy patch in early 2015, though some heavily leveraged companies may be forced to sell at current prices, and some well-capitalized buyers may be opportunistic, said Tim Kitchen, Barclays Calgary-based head of Canadian investment banking.

Mining Slump

“It’s going to take a while for buyers and sellers to converge on price just because this has been such a dramatic fall off in valuation,” he said.

RBC was the only Canadian bank to finish in the top five of the league table based on the value of transactions.

Continued weakness in the mining sector was in part to blame for the showing of the Canadian banks, Peter Buzzi, RBC co-head of mergers and acquisitions, said in an interview. The industry traditionally accounts for more than half of the deals in the country, he said.

There were only about $18 billion worth of deals in mining in 2014, or about 8 percent of the total value. While that was more than double last year, it pales compared with the peak of about $85 billion in 2007 as commodity prices remain under pressure.

“We’re not looking for a recovery in mining M&A activity anytime soon,” said Buzzi.

Going Global

Canadian companies also preferred to shop abroad in 2014. The value of the Canadian outbound deals was larger than the inbound transactions involving Canadian targets.

Caisse de depot et placement du Quebec’s participation in the $8.6 billion takeover, including debt, of PetSmart Inc., led by BC Partners Holdings Ltd.’s was the biggest foreign takeover involving a Canadian acquirer this year.

Other notable Canadian outbound transactions included Amaya Gaming Group Inc.’s purchase of Oldford Group Ltd., the parent company of PokerStars, for $4.5 billion in June, making it the largest publicly held online gaming company in the world. Encana Corp.’s $6.8 billion acquisition of Athlon Energy Inc. was the biggest purchase of a U.S. oil and gas producer by a Canadian company.

Pension funds and companies increasingly are finding they need to go global for growth, Buzzi said.

‘That’s the trend,’’ he said. “You see Canadian companies getting bigger, and you see smaller Canadian companies being acquired by bigger global players.”